Priti Odhavji v Caroline Tighe & Ors

A regulated sale and rent back arrangement is determined objectively from the pleaded case and evidence. The seller’s subjective understanding or intention is not decisive. The arrangement must be made with the buyer itself and, when entered into, must provide both for the purchase of a qualifying interest in land and for the seller’s entitlement to occupy at least 40% of it as a dwelling. A later tenancy cannot, by itself, establish the necessary arrangement retrospectively. Alleged illegal conduct must be distinctly alleged and proved by clear and cogent evidence, although the civil standard remains the balance of probabilities.

The appeal arose from a County Court possession claim concerning the sale of the appellant’s home to the first respondent and the subsequent grant of a tenancy. The appellant counterclaimed that the transactions formed an unlawful sale and rent back arrangement contrary to the general prohibition in Financial Services and Markets Act 2000 (“FSMA”), and alternatively claimed relief concerning an alleged agreement to retain £100,000 of equity.

The County Court dismissed both the possession claim and counterclaim on 6 February 2024. It held that the appellant’s evidence was inconsistent with her pleaded case and that the evidence did not establish an arrangement with the first respondent. The appeal concerned the objective characterisation of the arrangement, pleading and evidential issues, the “by way of business” requirement, and the alternative equity claim.

1. Ground 1. The question whether a regulated sale and rent back arrangement was made is objective. The seller’s belief that she was entering into a loan, rather than selling the property, did not defeat the pleaded case. The County Court therefore erred in treating the appellant’s subjective intention as decisive. It was also wrong to regard reliance on the pleaded case as unfair where the respondents had been required to meet that case at trial. The court could assess whether the appellant’s evidence was mistaken in light of the documentary and other evidence.
2. Grounds 2 and 3. The appellant nevertheless failed to prove an arrangement with the first respondent. Under article 63J of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, the arrangement had to be made with the agreement provider and, at that time, provide both for the purchase of the qualifying interest and for the seller’s entitlement to occupy at least 40% of the land as a dwelling. The sale contract did not establish a prior right of occupation and was expressed to require vacant possession. The later tenancy was too late. The Legal Defence Agreement with the third respondent did not prove a connected arrangement with the first respondent. The admissions and documents were insufficient to establish illegal conduct.
3. The fact that some pleaded steps were unproved did not, in principle, prevent reliance on other pleaded steps. But where a later step depended on an earlier unproved agreement, the connection still had to be established.
4. Ground 4. Article 5 of the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 deemed the agreement provider to act by way of business unless a related-person exception applied. The ground could not assist the appellant.
5. Ground 5. The alternative proprietary estoppel and constructive trust case depended on unproved further representations. The appellant could not establish detrimental reliance on the Legal Defence Agreement when she did not understand it as such. The appeal was dismissed.

• Chancery Appeals, High Court: The appeal from the County Court at Central London was dismissed. The County Court’s order of 6 February 2024, dismissing the possession claim and counterclaim and making no order as to costs, was upheld.